Cocoa demand will rise by a “moderate” 2 percent to 3 percent this season, according to Credit Suisse Group AG’s private banking unit.
“Demand from emerging countries should offset weakness in Western markets somewhat,” Tobias Merath, head of commodity research at the bank, wrote in a report e-mailed today.
Global cocoa production will fall this year because of dry weather in West Africa, the top growing region, the bank said. Carryover stockpiles from the 2010-11 season will be “more than sufficient to keep the market well supplied.” Cocoa production was 343,000 metric tons higher than consumption last year, according to a statement e-mailed from the International Cocoa Organization in London today.
“Overall neither supply nor demand should put significant pressure on the global cocoa market balance, and we see limited upside and downside risks in the medium term,” Merath said.
Cocoa traded on ICE Futures U.S. in New York will be at $2,250 a metric ton in three months and at $2,300 a ton in 12 months, according to the bank’s forecast. The commodity was down 2.3 percent to $2,062 a ton by 10:12 a.m. in New York.
Arabica coffee prices, which have dropped 28 percent this year, are likely to fall further as roasters don’t need to buy until the end of summer, the bank said.
“Physical market tightness should now start to ease,” the bank said, forecasting prices in New York at $1.70 a pound in three months and $1.60 a pound in 12 months. Coffee was down 1.4 percent to $1.631 a pound in New York.
The development of an El Nino could result in lower sugar production in Thailand, the second-biggest exporter, and India, the second-largest producer, according to the report.
“This season’s surplus could be drawn down fairly quickly if Asian sugar production was to disappoint,” Merath said.
Sugar will be at 19 cents a pound in New York in three months and at 18 cents a pound in 12 months, the bank forecast, adding that the “price adjustment is probably over.” The sweetener was up 0.4 percent at 19.57 cents a pound in New York.